Have you heard of the CHFA RISC (Risk Information Score Card)? I will explain what it is real quick in case you haven’t.
CHFA wanted to avoid being adversely selected due to their limited overlays so a few years ago they implemented the CHFA RISC. Only under certain circumstances was the RISC required. Here is a chart that explains when and how the RISC was to be used per CHFA requirements:
Let me share a real life scenario that just happened a couple of days ago. I had a customer with a 629 credit score in need of down payment assistance. We completed the pre-approval process which included the CHFA RISC. He could not pass the scorecard so we had to stay at a 43% debt-to-income ratio to get him qualified (see the second line above). This limited him to a maximum monthly payment of just $1,215/mo.
Well, I’ve got good news! Effective for all loans locked with CHFA on June 20th, 2016 or later the CHFA RISC has been eliminated. There are still some limitations for those with lower credit scores. Here are the requirements:
- Credit scores 620 – 659 will be limited to a 50% DTI
- Credit scores 660+ will have a maximum 55% DTI
Let’s go back to my customer looking to get approved. Now, instead of being limited to 43% DTI we can now go to 50%! For this particular customer that increased him from a max qualifying payment of $1,215 all the way to $1,710/mo! That was a $75,000 increase in estimated purchase price.